Using the MACRS rates from the following table, what is the book value of a $3,500 computer after 2 years? Year MACRS Rate 1 20.0 % 2 32.0% 3 19.2 % 11.52% 11.52 % book value = [?] Round to the nearest hundredth. 45
Using the MACRS rates from the following table, what is the book value of a $3,500 computer after 2 years? Year MACRS Rate 1 20.0 % 2 32.0% 3 19.2 % 11.52% 11.52 % book value = [?] Round to the nearest hundredth. 45
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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using the macrs rates from the following table, what is the book value of a $3500 computer after 2 years?
![### Modified Accelerated Cost Recovery System (MACRS)
**Problem Statement:**
Using the MACRS rates from the following table, what is the book value of a $3,500 computer after 2 years?
**MACRS Depreciation Rates:**
| Year | MACRS Rate |
|------|------------|
| 1 | 20.0 % |
| 2 | 32.0 % |
| 3 | 19.2 % |
| 4 | 11.52 % |
| 5 | 11.52 % |
**Instruction:**
Round the final answer to the nearest hundredth.
**Equation to use:**
\[ \text{Book Value After 2 Years} = \text{Initial Value} \times (1 - \text{Depreciation Year 1}) \times (1 - \text{Depreciation Year 2}) \]
**Step-by-step Calculation:**
1. Initial Value = $3,500
2. Depreciation for Year 1 = 20.0%
3. Depreciation for Year 2 = 32.0%
Let's break this down:
1. After Year 1:
\[ \text{Value After Year 1} = 3500 \times (1 - 0.20) = 3500 \times 0.80 = 2800 \]
2. After Year 2:
\[ \text{Value After Year 2} = 2800 \times (1 - 0.32) = 2800 \times 0.68 = 1904 \]
So, the book value of the computer after 2 years is $1904.00.
**Interactive Element:**
- Enter the calculated book value and verify with an interactive feature to validate understanding and correctness of the computation.
**User Input:**
\[ \text{book value} = \text{[ ]} \]
**Note:**
Please round to the nearest hundredth.
After completing the calculation, click the Enter button to check your answer.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff9e8dd4b-28a8-4888-a501-fa324a5fe842%2F63b77421-06ba-4408-9095-548e1f413d77%2F2iyl20t_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Modified Accelerated Cost Recovery System (MACRS)
**Problem Statement:**
Using the MACRS rates from the following table, what is the book value of a $3,500 computer after 2 years?
**MACRS Depreciation Rates:**
| Year | MACRS Rate |
|------|------------|
| 1 | 20.0 % |
| 2 | 32.0 % |
| 3 | 19.2 % |
| 4 | 11.52 % |
| 5 | 11.52 % |
**Instruction:**
Round the final answer to the nearest hundredth.
**Equation to use:**
\[ \text{Book Value After 2 Years} = \text{Initial Value} \times (1 - \text{Depreciation Year 1}) \times (1 - \text{Depreciation Year 2}) \]
**Step-by-step Calculation:**
1. Initial Value = $3,500
2. Depreciation for Year 1 = 20.0%
3. Depreciation for Year 2 = 32.0%
Let's break this down:
1. After Year 1:
\[ \text{Value After Year 1} = 3500 \times (1 - 0.20) = 3500 \times 0.80 = 2800 \]
2. After Year 2:
\[ \text{Value After Year 2} = 2800 \times (1 - 0.32) = 2800 \times 0.68 = 1904 \]
So, the book value of the computer after 2 years is $1904.00.
**Interactive Element:**
- Enter the calculated book value and verify with an interactive feature to validate understanding and correctness of the computation.
**User Input:**
\[ \text{book value} = \text{[ ]} \]
**Note:**
Please round to the nearest hundredth.
After completing the calculation, click the Enter button to check your answer.
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